Global oil giant Royal Dutch Shell is selling almost all of its stake in Australia's biggest oil and gas producer, Woodside.

Shell announced the sale of about 157 million shares in Woodside, netting Shell about $5.32 billion after tax.

Shell is Woodside's biggest shareholder, currently holding 23 per cent or 190 million shares in the company. The sale will reduce it to a shareholding of 4.5 per cent.

Shell chief executive Ben van Beurden says the decision does not reflect the confidence the company has in Australia as a key energy producer.

"Today's announcement is part of our drive to improve Shell's capital efficiency and to focus our Australian growth in directly owned assets," Mr van Beurden said.

"It doesn't change our view of Australia as an important player on the global energy stage, or Shell's central role in the country's energy industry."

Woodside is spending $2.85 billion on buying back about half of the shares, representing about 9.5 per cent of the company's issued share capital, funded through a combination of existing cash and debt facilities.